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HHS FY 2017 Budget in Brief - CMS - Medicare


Centers for Medicare & Medicaid Services (CMS): Medicare

Centers for Medicare & Medicaid ServicesThe Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Medicare Budget Overview

(Dollars in millions)

Current Law Outlays and Offsetting Receipts 2015 2016 2017 2017
+/- 2016
Benefits Spending (gross) /1 627,710 684,282 709,386 +25,105
Less: Premiums Paid Directly to Part D Plans /2 -8,520 -9,282 -11,132 -1,850
Subtotal, Benefits Net of Direct Part D Premium Payments 619,190 675,000 698,255 +23,254
Related Benefit Expenses /3 12,662 13,031 13,140 +109
Administration /4 8,593 8,940 9,346 +406
Total Outlays, Current Law 640,445 696,971 720,741 +23,769
Premiums and Offsetting Receipts -94,218 -101,655 -111,199 -9,545
Current Law Outlays, Net of Offsetting Receipts 546,228 595,317 609,541 +14,225
Proposed Law 2015 2016 2017 2017
+/- 2016
Medicare Proposals, Net of Offsetting Receipts 0 0 -3,729 -3,729
Savings from Program Integrity Investments /5
0 0 -845 -845
Total Net Outlays, Adjusted Baseline, Savings from Program Integrity Investments and Proposed Law 546,228 595,317 604,967 +9,651
Mandatory Total Net Outlays, Proposed Policy /6 539,899 588,752 598,191 +9,440

Table Footnotes

1/ Represents all spending on Medicare benefits by either the Federal government or other beneficiary premiums. Includes Medicare Health Information Technology Incentives.

2/ In Part D only, some beneficiary premiums are paid directly to plans and are netted out here because those payments are not paid out of the Trust Funds.

3/ Includes related benefit payments, including refundable payments made to providers and plans, transfers to Medicaid, and additional Medicare Advantage benefits.

4/ Includes CMS Program Management, non-CMS administration, HCFAC, and QIOs.

5/ Represents all scorable costs and savings under PAYGO rules of legislative proposals that affect the Medicare trust funds, including transfers to Medicaid of $370 million in FY 2015 and $775 million in FY 2016 to extend the Qualified Individuals (QI) Program.

6/ Includes non-PAYGO savings from HHS and Social Security program integrity investments on the Medicare baseline.

7/ Removes total Medicare discretionary amount: FY 2014- $6,386 million; FY 2015- $6,427 million; and FY 2016- $6,739 million.

CMS Medicare Programs and Services

In FY 2017, the Office of the Actuary has estimated that gross current law spending on Medicare benefits will total $709.4 billion. Medicare will provide health

insurance to 58 million individuals who are age 65 or older, disabled, or have end-stage renal disease.

The Four Parts of Medicare

Part A ($202.1 billion gross fee‑for‑service spending in 2017)

Medicare Part A pays for inpatient hospital, skilled nursing facility, home health related to a hospital stay, and hospice care. Part A financing comes primarily from a 2.9 percent payroll tax paid by both employees and employers.

Generally, individuals with 40 quarters of Medicare‑covered employment are entitled to Part A without paying a premium, but most services require beneficiary coinsurance. In 2016, beneficiaries pay a $1,288 deductible for a hospital stay of 1–60 days, and $161 daily coinsurance for days 21–100 in a skilled nursing facility.

Part B ($192.9 billion gross fee‑for‑service spending in 2017)

Medicare Part B pays for physician, outpatient hospital, end-stage renal disease, laboratory, durable medical equipment, certain home health, and other medical services. Part B coverage is voluntary, and about 91 percent of all Medicare beneficiaries are enrolled in Part B. Approximately 25 percent of Part B costs are financed by beneficiary premiums, with the remaining 75 percent covered by general revenues.

Medicare Enrollment

(person-years in millions)

  2015 2016 2017 2017
+/- 2016
Aged 65 and Over 46.0 47.7 49.3 +1.7
Disabled 9.0 9.0 9.0 +0.0
Total Beneficiaries 55.0 56.7 58.4 +1.7

Source: CMS office of the Actuary estimates.
Note: Numbers may not add due to rounding.

The standard monthly Part B premium is $121.80 in 2016. However, approximately 70 percent of beneficiaries are held harmless from increases to the Part B premium in 2016 compared to 2015, because the Social Security cost of living adjustment for 2016 is 0 percent. Therefore, these beneficiaries will continue to pay the 2015 premium amount of $104.90. The Bipartisan Budget Act prevented an even higher premium from going into effect for the 30 percent of beneficiaries who are not held harmless. Some beneficiaries pay a higher Part B premium based on their income: those with annual incomes above $85,000 (single) or $170,000 (married) will pay from $170.50 to $389.80 per month in 2016. The Part B deductible in 2016 is $166 for all beneficiaries.

Part C ($204.7 billion gross spending in 2017)

Medicare Benefits by Service 2017
Medicare Part C, the Medicare Advantage program, pays plans a capitated monthly payment to provide all Part A and B services, and Part D services, if offered by the plan. Plans can offer additional benefits or alternative cost‑sharing arrangements that are at least as generous as the standard Parts A and B benefits under traditional Medicare. In addition to the regular Part B premium, beneficiaries who choose to participate in Part C may pay monthly plan premiums which vary based on the services offered by the plan and the efficiency of the plan.

In 2017, Medicare Advantage enrollment will total approximately 19.5 million. Over the past 10 years, Medicare Advantage enrollment as a percentage of total enrollment has increased by 95 percent (see graph on Medicare Advantage Enrollment 2005-2017). CMS data confirm that Medicare beneficiary access to a Medicare Advantage plan remains strong and stable at 99 percent in 2016, premiums have remained stable, Medicare Advantage supplemental benefits have increased, and enrollment is growing faster than in traditional Medicare.

Part D ($109.7 billion gross spending in 2017)

Medicare Part D offers a standard prescription drug benefit with a 2016 deductible of $360 and an average estimated monthly premium of $41. Enhanced and alternative benefits are also available with varying deductibles and premiums. Beneficiaries who choose to participate are responsible for covering a portion of the cost of their prescription drugs. This portion may vary depending on whether the medication is generic or a brand name and how much the beneficiary has already spent on medications that year. Low‑income beneficiaries are responsible for varying degrees of cost‑sharing, with co‑payments ranging from $0 to $7.40 in 2016 and low or no monthly premiums. For 2017, the number of beneficiaries enrolled in Medicare Part D is expected to increase by about 4 percent to 44.5 million, including about 12.7 million beneficiaries who receive the low‑income subsidy. In 2016, approximately 58 percent of those with Part D coverage are enrolled in a stand‑alone Part D Prescription Drug Plan, 38 percent are enrolled in a Medicare Advantage Prescription Drug Plan, and the remaining beneficiaries are enrolled in an employer plan or the Limited Income Newly Eligible Transition plan. Overall, approximately 88 percent of all Medicare beneficiaries receive prescription drug coverage through Medicare Part D, employer‑sponsored retiree health plans, or other creditable coverage.

Medicare advantage enrollment 2017
The Affordable Care Act closes the Medicare Part D coverage gap, or “donut hole,” through a combination of manufacturer discounts and gradually increasing federal subsidies. Beneficiaries fall into the coverage gap once their total drug spending exceeds an initial coverage limit ($3,310 in 2016), until they reach the threshold for qualified out-of-pocket spending ($4,850 in 2016), at which point they are generally responsible for five percent of their drug costs. Prior to the Affordable Care Act, beneficiaries were responsible for 100 percent of their drug costs in the coverage gap. Under the Affordable Care Act, in 2017, non‑Low Income Subsidy beneficiaries who reach the coverage gap will pay 40 percent of the cost of covered Part D brand drugs and biologics and 51 percent of the costs for all generic drugs in the coverage gap. Cost‑sharing in the coverage gap will continue to decrease each year until beneficiaries are required to pay only 25 percent of the costs of covered Part D drugs in 2020 and beyond.

In 2015, more than 5.1 million beneficiaries reached the coverage gap and saved more than $5.4 billion on their medications due to the prescription drug discount program. These savings averaged about $1,054 per person.

2017 Legislative Proposals

The FY 2017 Budget includes a package of Medicare legislative proposals that will save a net $419.4 billion over 10 years by supporting delivery system reform to promote high‑quality, efficient care, improving beneficiary access to care, addressing the rising cost of pharmaceuticals, more closely aligning payments with costs of care, and making structural changes that will reduce federal subsidies to high‑income beneficiaries and create incentives for beneficiaries to seek high‑value services. These proposals, combined with tax proposals included in the FY 2017 President’s Budget, would help extend the life of the Medicare Hospital Insurance Trust Fund by over 15 years.

Hospital harm reduction 2017

Support Delivery System Reform

The following Medicare proposals represent better ways to pay providers, deliver care, and distribute information.

Payment Incentives

Reform Medicare Advantage Payments to Improve the Efficiency and Sustainability of the Program

This proposal incentivizes Medicare Advantage plans to submit cost-effective bids while preserving beneficiary rebates and standardizing quality bonus payments across counties. The proposal establishes competitive bidding in Medicare Advantage by calculating an adjusted benchmark, against which plans are paid, as the lesser of the current law fee-for-service benchmark or the average Medicare Advantage plan bid plus a five percent “buffer” to protect beneficiary rebates. This competitively bid benchmark would – for the first time – allow CMS to use plan bids to set the benchmark and reward plans for lowering their bids by allowing them to retain 100 percent of the difference between their bid and the benchmark as the rebate. Additionally, the proposal would standardize quality bonus payments across counties by removing the doubling of the quality bonus payment which is only available in certain areas and lifting the cap on benchmarks for plans that are entitled to receive a quality bonus payment. This proposal prepares for the future of Medicare by reforming Medicare Advantage payments to improve efficiency and sustainability of the program for all Medicare beneficiaries. [$77.2 billion in savings over 10 years]

Implement Bundled Payment for Post-Acute Care

Beginning in 2021, this proposal implements bundled payment for post-acute care providers, including long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities, and home health providers. Payments will be bundled for at least half of the total payments for post-acute care providers. Rates based on patient characteristics and other factors will be set so as to produce a permanent and total cumulative adjustment of 2.85 percent by 2023. Beneficiary coinsurance will equal that under current law (e.g., to the extent the beneficiary uses skilled nursing facilities, the beneficiaries would be responsible for the current law coinsurance rate). [$9.9 billion in savings over 10 years]

goals in reforming medicare advantage 2017

Expand Basis for Beneficiary Assignment for Accountable Care Organizations to include Nurse Practitioners, Physician Assistants, and Clinical Nurse Specialists

This proposal allows the Secretary to base beneficiary assignment in the Medicare Shared Savings Program on a broader set of primary care providers. Under the proposal, beneficiaries will be assigned to an Accountable Care Organization on the basis of primary care services delivered by nurse practitioners, physician assistants, and clinical nurse specialists. Statute requires that assignment of beneficiaries to an Accountable Care Organization be based on their utilization of primary care services provided by physicians. Expanding the assignment of beneficiaries to nurse practitioners, physician assistants, and clinical nurse specialists, in addition to physicians, could broaden the scope of Accountable Care Organizations to better reflect the types of professionals that deliver primary care services to fee-for-service beneficiaries. Some Medicare beneficiaries, especially those in rural or underserved areas, receive most or all of their primary care from non-physician practitioners. This proposal results in a greater number of Medicare fee-for-service beneficiaries who rely on these practitioners for their care being assigned to Accountable Care Organizations. [$150 million in savings over 10 years]

Allow CMS to Assign Beneficiaries to Federally Qualified Health Centers and Rural Health Clinics Participating in the Medicare Shared Savings Program

This proposal allows the Secretary to assign more Medicare fee-for-service beneficiaries to an Accountable Care Organization under the Medicare Shared Savings Program based on primary care services furnished to them by Federally Qualified Health Centers and Rural Health Clinics. Federally Qualified Health Centers and Rural Health Clinics are important providers of primary care services and part of the safety net for the nation’s health care system. This proposal could result in assignment of a greater number of Medicare fee-for-service beneficiaries to Accountable Care Organizations and would stimulate greater interest in the program by Federally Qualified Health Centers and Rural Health Clinics and support the program’s goals to improve quality of care for Medicare fee-for-service beneficiaries while reducing overall growth in costs. [$80 million in savings over 10 years]

Allow Accountable Care Organizations to Pay Beneficiaries for Primary Care Visits up to the Applicable Medicare CostSharing Amount

This proposal allows Accountable Care Organizations participating in two-sided risk models to pay beneficiaries for a primary care visit. Beneficiaries with no supplemental insurance will have all or part of their cost sharing covered by the Accountable Care Organization, and beneficiaries with supplemental insurance would receive a payment from the Accountable Care Organization. Participation from is voluntary, and no additional payments will be made to cover the costs of this investment. [$70 million in savings over 10 years]

Establish a Bonus Payment for Hospitals Cooperating with Certain Alternative Payment Models

Under this proposal, hospitals that furnish a sufficient proportion of their services through eligible alternative payment entities will receive a bonus payment starting in 2022. Bonuses would be paid through the Inpatient Prospective Payment System permanently and through the Outpatient Prospective Payment System until 2024. Each year, hospitals that qualify for this bonus will receive an upward adjustment to their base payments. Reimbursement through the inpatient and outpatient prospective payment systems to all providers will be reduced by a percentage sufficient to ensure budget neutrality. [No budget impact]

Establish a Hospital-Wide Readmissions Reduction Measure

This proposal makes revisions to the Hospital Readmissions Reduction Program to allow the Secretary to use a comprehensive Hospital-Wide Readmission Measure that encompasses broad categories of conditions rather than discrete “applicable conditions.” The Secretary will be permitted to make future budget-neutral amendments to the measure to enhance accuracy as necessary. [No budget impact]

Establish Quality Bonus Payments for High-Performing Part D Plans

This proposal allows Medicare to revise the Part D plan payment methodology to reimburse plans based on their quality star ratings. Plans with quality ratings of four stars or higher would have a larger portion of their bid subsidized by Medicare, while plans with lower ratings would receive a smaller subsidy. This proposal is modeled after the Medicare Advantage Quality Bonus Program, but would be implemented in a budget neutral fashion. It would not impact risk corridor payments, reinsurance, low-income subsidies, or other components of Part D payments. [No budget impact]

Extend Accountability for Hospital-Acquired Conditions

This proposal requires hospitals to code conditions as “present on arrival” instead of “present on admission” for the purposes of the Medicare Hospital Acquired Conditions payment policy and quality reporting. [No budget impact]

Implement Value-Based Purchasing for Additional Providers

This proposal implements a budget neutral value‑based purchasing program for several additional provider types, including skilled nursing facilities, home health agencies, ambulatory surgical centers, hospital outpatient departments, and community mental health centers beginning in 2018. At least two percent of payments must be tied to the quality and efficiency of care in the first two years of implementation and at least five percent beginning in 2020. [No budget impact]

Care Delivery

Expand the Ability of Medicare Advantage Organizations to Pay for Services Delivered via Telehealth

This proposal allows the Secretary discretion to expand the ability of Medicare Advantage organizations to deliver medical services via telehealth by eliminating otherwise applicable Part B requirements that certain covered services be provided exclusively through face-to-face encounters. By integrating face-to-face care with remote access care in both rural and urban areas, this proposal will improve care coordination, provide for more timely exchanges between specialists, and facilitate beneficiary access to care in situations where traveling to provider offices would be more difficult. The decision to utilize the telehealth benefit would remain at the discretion of the beneficiary. [$160 million in savings over 10 years]

Allow the Secretary to Introduce Primary Care Payments under the Physician Fee Schedule in a Budget Neutral Manner

Beginning in calendar year 2017, this proposal allows the Secretary to introduce additional primary care payments into the Medicare Physician Fee Schedule. The new per‑beneficiary payments will equal the average per‑beneficiary payment under the expired incentive program. These payments will be exempt from beneficiary cost sharing and incorporated into the Physician Fee Schedule in a budget neutral manner. These payments will provide valuable long term incentives for the provision of primary care services. [No budget impact]

Information

Add Certain Behavioral Health Providers to the Electronic Health Record Incentive Programs

This proposal expands the Medicare and Medicaid Electronic Health Record Incentive Programs to include psychiatric hospitals, community mental health centers, residential and outpatient mental health and substance use disorder treatment clinics, and psychologists. These programs currently include only a few types of providers that offer behavioral health services, such as critical access hospitals. Adoption of interoperable electronic health records by these providers has lagged behind other providers that participated in the EHR incentive program. Facilitating the adoption and meaningful use of electronic health records by the broader community of behavioral health providers will promote the sharing of clinical data needed to provide safe, timely, efficient, and effective patient-centered care. [$760 million in Medicare costs over 10 years]

Increase Value in Medicare Provider Payments

Eliminate the 190-Day Lifetime Limit on Inpatient Psychiatric Facility Services

The 190-day lifetime limit on inpatient services delivered in specialized psychiatric hospitals is one of the last obstacles to behavioral health parity in the Medicare benefit. Beginning in FY 2017, this proposal would eliminate the 190-day limit and more closely align the Medicare mental health care benefit with the current inpatient physical health care benefit. Many beneficiaries who utilize psychiatric services are eligible for Medicare due to a disability, which means they are often younger beneficiaries who can easily reach the 190-day limit over their lifetimes. This proposal will expand the psychiatric benefit and bring parity to the sites of service, while also containing the additional costs of removing the 190-day limit. [$2.4 billion in Medicare costs over 10 years]

Update Medicare Disproportionate Share Formula for Hospitals in Puerto Rico

This proposal updates the Medicare Disproportionate Share Hospital formula for hospitals in Puerto Rico. It grants the Secretary the authority to use a proxy for Supplemental Security Income when calculating Medicare Disproportionate Share payments for Puerto Rico hospitals. Under current law, residents of Puerto Rico are not eligible for Supplemental Security Income. Puerto Rico hospitals are at a disadvantage in the calculation of Medicare Disproportionate Share payments because the formula relies, in part, on Medicare Supplemental Security Income inpatient days. Disproportionate Share payments to hospitals outside of Puerto Rico will not be impacted. [$70 million in costs over 10 years]

Adjust Payment Updates for Certain Post‑Acute Care Providers

This proposal reduces market basket updates for inpatient rehabilitation facilities, long-term care hospitals, and home health agencies by 1.1 percentage points in FY 2017 and each year FY 2019 through FY 2026. For 2018, the statute requires an update of 1 percent for these post-acute care providers. Payment updates for these providers would not drop below zero as a result of this proposal. This proposal will reduce market basket updates for skilled nursing facilities under an accelerated schedule, beginning with a -2.5 percent update in FY 2017; -2 percent in FY 2019; ‑1 percent in each year FY 2020-2023; and tapering down to a -0.97 percent update in FY 2024. Payment updates may drop below zero as a result of this proposal for skilled nursing facilities. [$86.6 billion in savings over 10 years]

Strengthen the Independent Payment Advisory Board to Reduce Long-Term Drivers of Medicare Cost Growth

The Affordable Care Act established the Independent Payment Advisory Board as a backstop to control long‑term spending growth in the Medicare program. Under current law, if the projected Medicare per capita growth rate exceeds a predetermined target growth rate, the Independent Payment Advisory Board will recommend policies to Congress to reduce the Medicare growth rate to meet a specified target. To further moderate Medicare cost growth, this proposal will lower the target rate for triggering the Board applicable for 2018 and after from gross domestic product per capita growth plus 1 percentage point to gross domestic product per capita growth plus 0.5 percentage points. [$36.4 billion in savings over 10 years]

Increasing Access and Encouraging Innovation in Lifesaving Drugs and Biologics

HHS is committed to working with its federal and non-federal partners and stakeholders to improve the market for affordable, innovative drugs and biologics. HHS’s key priorities in this effort are:

  1. Increasing Access to Information: Greater visibility into the economics of drug development and pricing provides patients and providers with relevant information to support better health care decisions.
  2. Driving Innovation: The Department is working to advance research and promote innovation through expanded efforts in genomics and personalized medicine, including development of new therapeutic approaches and advancement of regulatory models.
  3. Strengthening Incentives and Promoting Competition: HHS supports purchasing strategies that address costs, while improving the access and affordability of drugs for beneficiaries. The Department is working to better align financial incentives for providers, drug manufacturers, and other insurers with our goals for better care, smarter spending, and healthier people.

The Budget includes a number of proposals that work toward these goals, as well as our shared goal of encouraging payment for value rather than volume in throughout health system.

Reduce Medicare Coverage of Bad Debts

For most institutional provider types, Medicare currently reimburses 65 percent of bad debts resulting from beneficiaries’ non‑payment of deductibles and coinsurance after providers have made reasonable efforts to collect the unpaid amounts. Starting in 2017, this proposal would reduce bad debt payments to 25 percent over 3 years for all providers who receive bad debt payments.& This proposal will more closely align Medicare policy with private payers, who do not typically reimburse for bad debt. [$32.9 billion in savings over 10 years]

Encourage Workforce Development Through Targeted and More Accurate Indirect Medical Education Payment

The Medicare Payment Advisory Commission has found that existing Medicare add‑on payments to teaching hospitals for the indirect costs of medical education significantly exceed the actual added patient care costs these hospitals incur. This proposal will partially correct this imbalance by reducing these payments by 10 percent, beginning in 2017. In addition, the Secretary will be granted the authority to set standards for teaching hospitals receiving Graduate Medical Education payments to encourage resident training in areas of emerging need, such as primary care and medication-assisted treatment of substance use disorders, and emphasize skills that promote high‑quality, high-value health care. [$17.8 billion in savings over 10 years]

Reform Medicare Hospice Payments

CMS has taken steps to improve the accuracy of hospice benefit payments, but there are additional opportunities for improvement. This proposal reduces market basket updates for hospice providers by 1.7 percent in 2018, 2019, and 2020 as a first step toward aligning payment with costs of care. Payment updates for providers would not drop below zero as a result of this proposal. This proposal also permits the Secretary to implement a hospice-specific market basket by 2021. Currently, the hospice market basket is based on the hospital market basket, despite differences in the type of service provided (palliative vs. curative), the care setting (at home vs. inpatient), and the labor force utilized. Finally, this proposal permits the Secretary to make further budget neutral reforms to the hospice payment system. [$9.3 billion in savings over 10 years]

Exclude Certain Services from the In-Office Ancillary Services Exception

The in-office ancillary services exception to the physician self-referral law was intended to allow physicians to self-refer for certain services to be furnished by their group practices for patient convenience. While there are many appropriate uses for this exception, certain services, such as advanced imaging and outpatient therapy, are rarely furnished on the same day as the related physician office visit. Additionally, there is evidence that suggests that this exception may have resulted in overutilization and rapid growth of certain services. Effective calendar year 2018, this proposal seeks to encourage more appropriate use of ancillary services by amending the in-office ancillary services exception to prohibit certain referrals for radiation therapy, therapy services, advanced imaging, and anatomic pathology services except in cases where a practice is clinically integrated and required to demonstrate cost containment, as defined by the Secretary. [$5.0 billion in savings over 10 years]

Provide Authority to Expand Competitive Bidding for Certain Durable Medical Equipment

Since implementation, the Competitive Bidding Program for durable medical equipment, prosthetics, and supplies has saved the Medicare program and beneficiaries billions of dollars by aligning payment amounts with market-based prices. Currently this program is restricted to certain categories of equipment, supplies and services. This proposal expands the competitive bidding program to additional categories, including: inhalation drugs, all prosthetics and orthotics, and ostomy, tracheostomy, and urological supplies. [$3.8 billion in savings over 10 years]

Encourage Appropriate Use of Inpatient Rehabilitation Facilities

This proposal adjusts the standard for classifying a facility as an Inpatient Rehabilitation Facility. Under current law, at least 60 percent of patient cases admitted to an Inpatient Rehabilitation Facility must meet 1 or more of 13 designated severity conditions. This standard was changed to 60 percent from 75 percent in the Medicare, Medicaid, and SCHIP Extension Act of 2007. Beginning in 2017, this proposal reinstitutes the 75 percent standard to ensure that health facilities are classified appropriately based on the patients they serve. [$2.2 billion in savings over 10 years]

Reduce Critical Access Hospital Reimbursements from 101 Percent of Reasonable Costs to 100 Percent of Reasonable Costs

Critical Access Hospitals are generally small, rural hospitals that provide their communities with access to basic emergency and inpatient care. Critical Access Hospitals receive enhanced cost‑based Medicare payments (rather than the fixed‑fee payments most hospitals receive). Medicare currently pays Critical Access Hospitals 101 percent of reasonable costs. This proposal reduces this rate to 100 percent beginning in 2017. [$1.7 billion in savings over 10 years]

Prohibit Critical Access Hospital Designation for Facilities that are Less Than 10 Miles from the Nearest Hospital

Beginning in 2017, this proposal prevents facilities that are within 10 miles of another hospital from maintaining designation as a critical access hospital and receiving the enhanced rate. These facilities will instead be paid under the applicable prospective payment system. [$880 million in savings over 10 years]

Allow the Secretary to Determine Hospital Acquired Condition Reduction Program Penalty Amounts and Distribution

Beginning in FY 2018, the proposal provides authority to the Secretary to specify through regulation the amount, scoring and penalty payment calculation methodology, and distribution of penalties to be assessed to eligible hospitals participating in the Hospital Acquired Condition Reduction Program. The proposal is structured in such a way that the new program produces savings at least equivalent to the current reduction program. [No budget impact]

Clarify the Medicare Fraction in the Medicare Disproportionate Share Statute

This proposal clarifies that individuals who have exhausted inpatient benefits under Part A or who have elected to enroll in Part C plan should be included in the calculation of the Medicare fraction of hospitals’ Disproportionate Share Hospital patient percentages. [No budget impact]

Modernize Funding for End Stage Renal Disease Networks

This proposal changes the withhold for the End Stage Renal Disease Networks from 50 cents to $1.50 per treatment, to be updated annually by the consumer price index. The withhold is deducted from each End Stage Renal Disease Prospective Payment System per‑treatment payment, and has not been increased since 1986 when it first took effect. The End Stage Renal Disease Networks are currently underfunded to meet statutory and regulatory obligations. In order for the End Stage Renal Disease Networks to effectively and efficiently administer the future demands of the End Stage Renal Disease program, increased operational resources are required. [No budget impact]

Recoup Initial Clinical Laboratory Fee Schedule Payments for Advanced Diagnostic Laboratory Tests in Excess of 100 percent of the Final Payment Amount

Rising cost of drugs 2017

Under current law, beginning in 2017, laboratories providing new advanced diagnostic laboratory tests receive invoice pricing for an initial period. If the price paid by Medicare during the initial period exceeds 130 percent of the final payment rate, CMS is required to recoup the difference in payment amounts enacted in the Protecting Access to Medicare Act of 2014. Beginning calendar year 2017, this proposal lowers the threshold required for CMS to recoup differences in Clinical Laboratory Fee Schedule payments for new advanced diagnostic laboratory tests from 130 percent to 100 percent. [No budget impact]

Repeal the Rental Cap for Oxygen Equipment

This proposal eliminates the 36-month rental cap for oxygen equipment and reduces the monthly payment amount for oxygen and oxygen equipment by the necessary percentage to be budget neutral. Eliminating the rental cap will improve beneficiary access to care, particularly when a patient relocates during the 36-month period, and reduce administrative burden for both CMS and suppliers. [No budget impact]

Address the Rising Cost of Pharmaceuticals

Align Medicare Drug Payment Policies with Medicaid Policies for Low‑Income Beneficiaries

Currently, drug manufacturers are required to pay specified rebates for drugs dispensed to Medicaid beneficiaries. In contrast, Medicare Part D plan sponsors negotiate with manufacturers to obtain plan‑specific rebates at unspecified levels. Analysis has found substantial differences in rebate amounts and prices paid for brand name drugs under the two programs, with Medicare receiving significantly lower rebates and paying higher prices than Medicaid. Prior to the establishment of Medicare Part D, manufacturers paid Medicaid rebates for drugs provided to the dual eligible population. This proposal allows Medicare to benefit from the same rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the Part D Low‑Income Subsidy, beginning in 2018. The proposal requires manufacturers to pay the difference between rebate levels they already provide Part D plans and the Medicaid rebate levels. Manufacturers will also be required to provide an additional rebate for brand name and generic drugs when their prices rise faster than inflation. [$121.3 billion in savings over 10 years]

Accelerate Manufacturer Drug Discounts to Provide Relief to Medicare Beneficiaries in the Coverage Gap

Prior to the passage of the Affordable Care Act, beneficiaries were responsible for the full cost of their medications while in the Medicare Part D coverage gap. The law closes this gap by 2020 through a combination of manufacturer discounts and federal subsidies. Currently, beneficiaries in the Medicare Part D coverage gap receive a 50 percent discount from pharmaceutical manufacturers on their brand drugs. Beginning in plan year 2018, this proposal will increase manufacturer discounts to 75 percent, effectively closing the coverage gap for brand drugs three years earlier than under current law. The phase‑out for generic drugs will continue through 2020. [$10.2 billion in savings over 10 years]

Modify Reimbursement of Part B Drugs

To reduce excessive payment of Part B drugs administered in the physician office and hospital outpatient settings, this proposal lowers payment from 106 percent of the average sales price to 103 percent of average sales price starting in 2017. If a physician’s cost for purchasing the drug exceeds average sales price plus three percent, the drug manufacturer would be required to provide a rebate such that the net cost to the provider to acquire the drug equals average sales price plus three percent minus a standard overhead fee to be determined by the Secretary. This rebate will not be used in calculating average sales price. The Secretary will also be given authority to pay a portion or the entire amount above average sales price in the form of a flat fee rather than a percentage, with the modification to be made in a budget neutral manner relative to average sales price plus three percent. [$7.8 billion in savings over 10 years]

Require Mandatory Reporting of Other Prescription Drug Coverage

Although health plans offered by employers and unions are required by Medicare secondary payer-related law to report enrollment information on certain active employees, there is no requirement for other group health plans that offer a prescription drug benefit to report their plan enrollees with drug coverage to HHS or the Part D plan sponsors. This proposal extends mandatory reporting requirements to include prescription drug coverage. This extension ensures that all prescription drug coverage provided by group health plans that is primary to Medicare coverage is communicated to HHS and to Part D sponsors, thereby permitting sponsors to comply with the statutory Medicare secondary payer requirements. [$480 million in savings over 10 years]

Allow the Secretary to Negotiate Prices for Biologics and High Cost Prescription Drugs

Beginning in 2017, this proposal would give the Secretary the authority to directly negotiate prices with manufacturers for high-cost drugs and biologics covered under Part D. As a condition of participation in the Part D program, manufacturers must engage in negotiations with HHS. As part of the negotiation, manufacturers would be required to supply HHS with all cost and clinical data, as well as other information, necessary to come to an agreement on price. The final price would be indexed to the Consumer Price Index, and plan sponsors will be permitted to negotiate additional discounts off this price. HHS will monitor for increased introductions of physician administered drugs, which are reimbursed under Part B at the average sales price plus six percent instead of under Part D, and for excess price inflation for drugs currently on the market. [No budget impact]

Change the Part D Coverage Gap Discount Program Agreements from Annually to Quarterly

This proposal allows CMS to contract with pharmaceutical manufacturers on a quarterly, rather than an annual, basis for the Part D coverage gap discount program. In order for a manufacturer’s agreement to be in effect in a designated quarter, the manufacturer will enter into the agreement by the first day of the preceding quarter. Increasing the frequency of the coverage gap discount program contracting process will help ensure that Medicare beneficiaries have continued access to a wide range of drugs, including newly‑approved drugs, without unnecessary delays. [No budget impact]

Establish Authority for a Program to Prevent Prescription Drug Abuse in Medicare Part D

HHS requires Part D sponsors to conduct drug utilization reviews to assess the prescriptions filled by a particular enrollee. These efforts can identify overutilization that results from inappropriate or even illegal activity by an enrollee, prescriber, or pharmacy. However, HHS’s statutory authority to implement preventive measures in response to this information is limited. This proposal gives the HHS Secretary the authority to establish a program in Part D that requires that high-risk Medicare beneficiaries only utilize certain prescribers and/or pharmacies to obtain controlled substance prescriptions, similar to the programs many states utilize in Medicaid. The Medicare program will be required to ensure that beneficiaries retain reasonable access to services of adequate quality. [No budget impact]

Increase Part D Plan Sponsors’ Risk for Catastrophic Drugs

This proposal increases the degree to which Part D plan sponsors are at risk for drug costs in the catastrophic phase of the Part D benefit. Currently, under the defined standard benefit, Part D sponsors are at risk for 15 percent of catastrophic drug costs. This proposal increases the proportion of catastrophic costs for which Part D sponsors are at risk by 10 percentage points per year for 6 years, until the amount sponsors are at risk for in the catastrophic phase reaches 75 percent. Beneficiaries will continue to pay 5 percent coinsurance and the federal reinsurance subsidy would gradually decline to cover the remaining 20 percent. Modifying the benefit structure as proposed provides a greater incentive for sponsors to manage drug costs in the catastrophic phase. [No budget impact]

Require Evidence Development for Coverage of High Cost Drugs

This proposal creates a coverage with evidence development process for Medicare Part D. It will be modeled in part after the coverage with evidence development process in Parts A and B of Medicare and based on the collection of data to support the use of high cost pharmaceuticals in the Medicare population. For certain identified drugs, manufacturers will be required to undertake further clinical trials and data collection to support use in the Medicare population, and for any relevant subpopulations identified by CMS. Part D plans will be able to use this evidence to improve their clinical treatment guidelines and negotiations with manufacturers. The proposal helps to ensure that the coverage and use of new high-cost drugs are based on evidence of effectiveness for specific populations. [No budget impact]

Increase the Availability of Generic Drugs and Biologics

Prohibit Brand and Generic Drug Manufacturers from Delaying the Availability of New Generic Drugs and Biologics

Beginning in 2017, this proposal prohibits anticompetitive pay-for‑delay agreements between branded and generic pharmaceutical companies. This proposal increases the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into anticompetitive agreements which block consumer access to safe and effective genetics. This proposal saves money in both Medicare and Medicaid. [$12.3 billion in Medicare savings over 10 years]

Modify Length of Exclusivity to Facilitate Faster Development of Generic Biologics

This proposal increases competition for biological products by reducing the number of years (from 12 to 7) that a drug company has exclusivity or monopoly pricing power and prohibiting additional years of exclusivity due to minor formulation changes. The proposal also modifies how Part B pays for biosimilar and innovator biological products. For these products, reimbursement would be based on the weighted average sales price of the reference biological product and all of its biosimilars. This proposal saves money in both Medicare and Medicaid. [$6.9 billion in Medicare savings over 10 years]

Establish Transparency and Reporting Requirements in Pharmaceutical Drug Pricing

Currently, limited public information exists on how pharmaceutical manufacturers price drugs, and no law requires manufacturers to report on the costs driving their pricing decisions. To bring greater transparency to prescription drug pricing, this proposal requires pharmaceutical manufacturers to publically disclose production costs, including research and development investments, and discounts to various payers for specific high-cost drugs that the Secretary identifies through regulation based on the public’s interest. Reported transparency information may provide insight into the price of a drug as compared to the value it brings to the health care system. [No budget impact]

Medicare Structural Reforms

Eliminate Beneficiary Coinsurance for Screening Colonoscopies with Polyp Removal

Medicare beneficiaries are not subject to the Part B deductible or coinsurance for most recommended preventive and screening services, including screening colonoscopies. However, if a screening colonoscopy results in removal of a polyp, ablation, or other procedure, beneficiaries are subject to 20 percent coinsurance, which presents a financial challenge for beneficiaries to receive care. This proposal eliminates beneficiary coinsurance when the screening results in removal of a polyp or other procedure, thereby removing a significant barrier that beneficiaries face in receiving necessary preventive care. [$2.4 billion in costs over 10 years]

Increase Income Related Premiums under Medicare Parts B and D

Under Medicare Parts B and D, certain beneficiaries pay higher premiums based on their higher levels of income. Beginning in 2020, this proposal restructures income-related premiums under Medicare Parts B and D by increasing the applicable percent for calculating the lowest income‑related premiums by 5 percentage points, from 35 percent to 40 percent of program costs, and creating new tiers at 52.5 percent, 65 percent, 80 percent, and 90 percent. While last year’s proposal had the fourth tier at 77.5 percent, this proposal keeps the tier for those making $160,000 to $196,000 at 80 percent, consistent with the new tier created by the Medicare Access and CHIP Reauthorization Act of 2015. The proposal also maintains the current income thresholds associated with these premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. This proposal will help improve the financial stability of the Medicare program by reducing the federal subsidy of Medicare costs for those who need the subsidy the least. [$41.2 billion in savings over 10 years]

Encourage the Use of Generic Drugs by Low-Income Beneficiaries

Beginning in plan year 2018, this proposal induces greater generic utilization by lowering copayments for generic drugs. Brand copayments would be increased to twice the level required under current law. The Secretary would have the authority to exclude brand drugs in therapeutic classes from this policy if therapeutic substitution is determined not to be clinically appropriate or a generic is not available. Brand drugs could be obtained at current law cost‑sharing levels if beneficiaries successfully appeal. In addition, the change in cost‑sharing will be applied to low-income beneficiaries receiving a partial subsidy upon reaching the catastrophic coverage level. Beneficiaries qualifying for institutionalized care, who currently face no copayments, will be excluded from these changes. [$9.6 billion in savings over 10 years]

Modify the Part B Deductible for New Beneficiaries

Beneficiaries who are enrolled in Medicare Part B are required to pay an annual deductible ($166 in calendar year 2016). This deductible helps to share responsibility for payment of Medicare services between Medicare and beneficiaries. To strengthen program financing and encourage beneficiaries to seek high-value health care services, this proposal applies a $25 increase to the Part B deductible in 2020, 2022, and 2024 respectively for new beneficiaries beginning in 2020. Current beneficiaries or near retirees will not be subject to the revised deductible. [$4.2 billion in savings over 10 years]

Introduce Home Health Copayments for New Beneficiaries

This proposal creates a co‑payment for new beneficiaries of $100 per home health episode, starting in 2020. Consistent with MedPAC recommendations, this co‑payment will apply only for episodes with five or more visits not preceded by a hospital or inpatient post‑acute stay. Home health services represent one of the few areas in Medicare that do not currently include some beneficiary cost‑sharing. This proposal aims to encourage appropriate use of home health services while protecting beneficiary access. [$1.3 billion in savings over 10 years]

Reforming the Medicare Appeals Process

Provide Office of Medicare Hearings and Appeals and Departmental Appeals Board Authority to Use Recovery Audit Contractor Collections

This proposal expands the Secretary’s authority to retain a portion of Recovery Audit Contractor recoveries for the purpose of administering the Recovery Audit Program. This proposal will allow Recovery Audit program recoveries to fully fund Recovery Audit Contractor-related appeals at the Office of Medicare Hearings and Appeals and the Departmental Appeals Board. [$1.3 billion in cost over 10 ears]

Establish a Refundable Filing Fee

This proposal institutes a refundable filing fee for Medicare Parts A and B appeals for providers, suppliers, and State Medicaid agencies, including those acting as a representative of a beneficiary, and requires these entities to pay a per-claim filing fee at each level of appeal. This filing fee will allow HHS to invest in the appeals system to improve responsiveness and efficiency. Fees will be returned to appellants who receive a fully favorable appeal determination. [No budget impact]

Establish Magistrate Adjudication for Claims with Amount in Controversy Below New Administrative Law Judge Amount in Controversy Threshold

This proposal allows the Office of Medicare Hearings and Appeals to use Medicare magistrates for appealed claims below the federal district court amount in controversy threshold ($1,500 in calendar year 2016 and updated annually), reserving Administrative Law Judges for more complex and higher amount in controversy appeals. [No budget impact]

Expedite Procedures for Claims with No Material Fact in Dispute

This proposal allows the Office of Medicare Hearings and Appeals to issue decisions without holding a hearing if there is no material fact in dispute. These cases include appeals, for example, in which Medicare does not cover the cost of a particular drug or the Administrative Law Judge cannot find in favor of an appellant due to binding limits on authority. [No budget impact]

Increase Minimum Amount in Controversy for Administrative Law Judge Adjudication of Claims to Equal Amount Required for Judicial Review

This proposal increases the minimum amount in controversy required for adjudication by an Administrative Law Judge to the Federal Court amount in controversy requirement ($1,500 in calendar year 2016). This will allow the amount at issue to better align with the amount spent to adjudicate the claim. Appeals not reaching the minimum amount in controversy will be adjudicated by a Medicare magistrate. The minimum amount in controversy will increase consistent with the amount in controversy set for federal court. [No budget impact]

Remand Appeals to the Redetermination Level with the Introduction of New Evidence

This proposal remands an appeal to the first level of appeal when new documentary evidence is submitted into the administrative record at the second level of appeal or above. Exceptions may be made if evidence was provided to the lower level adjudicator but erroneously omitted from the record, or an adjudicator denies an appeal on a new and different basis than earlier determinations. This proposal incentivizes appellants to include all evidence early in the appeals process and ensures the same record is reviewed and considered at subsequent levels of appeal. [No budget impact]

Sample and Consolidate Similar Claims for Administrative Efficiency

This proposal allows the Secretary to adjudicate appeals through the use of sampling and extrapolation techniques. Additionally, this proposal authorizes the Secretary to consolidate appeals into a single administrative appeal at all levels of the appeals process. Parties who are appealing claims included within an extrapolated overpayment or consolidated previously will be required to file one appeal request for any such claims in dispute. [No budget impact]

Other Proposals

Allow Beneficiaries to Pay a Sum Certain to Medicare for Future Medical Items and Services

Medicare beneficiaries are unable to satisfy Medicare Secondary Payer “Future Medical” obligations at the time of settlement, judgment, award, or other payment because the current law does not specifically permit the Secretary to deposit such payment in the Medicare Trust Funds. Future Medical is defined as Medicare covered and otherwise reimbursable items and/or services furnished after the date of settlement, judgment, award, or other payment. This proposal expands current Medicare Secondary Payer statutory authority to permit the Secretary to deposit into the Medicare Trust Funds a lump sum, upfront payment from beneficiaries when they obtain liability insurance, no-fault insurance, and workers’ compensation settlements, judgments, awards, or other payments. [$65 million in savings over 10 years]

Clarify Calculation of the Late Enrollment Penalty for Medicare Part B Premium

This proposal clarifies that the cap on increases to the Part B premium, commonly referred to as the hold harmless provision, does not apply to the calculation of the Part B late enrollment penalty, but applies only to the annual increase to the basic Part B premium. The hold harmless provision imposes a cap on increases to the basic Part B premium based on the amount of the cost‑of-living adjustment increase in a beneficiary’s Social Security benefits. This clarification is consistent with current CMS practice. [No budget impact]

Reduce Fraud, Waste, Abuse, and Improper Payments in Medicare

Medicare Access and CHIP Reauthorization Act: Supporting Goals on Value-based Payments and Alternative Payment Models

The Medicare Access and CHIP Reauthorization Act (MACRA) is part of a broad effort to promote quality and value in Medicare. Through MACRA, HHS aims to

  • Support multi-payer initiatives and the development of alternative payment models in Medicare and Medicaid.
  • Offer multiple pathways with varying levels of risk and reward for physicians and other healthcare professionals to tie more of their payments to value and expand opportunities for them to participate in alternative payment models over time.
  • Increase the long-term efficiency of the Medicare program.
  • Improve the quality of care that Medicare beneficiaries receive.
  • Minimize additional reporting burdens for alternative payment model participants.
  • Promote understanding of each physician’s or practitioner’s status with respect to the Merit-Based Incentive Payment System and/or alternative payment models.

The Budget includes a number of proposals that work toward these goals, as well as our shared goal of encouraging payment for value rather than volume in throughout health system.

The Budget includes a number of Medicare program integrity proposals that strengthen the Department’s and states’ ability to fight fraud, waste, and abuse in the Medicare program and to reduce improper payments. See the Program Integrity chapter for proposal descriptions. [$1.4 billion in PAYGO costs and $3.3 billion in non-PAYGO savings over 10 years]

Legislative Proposals for Medicare-Medicaid Enrollees

The Budget includes four proposals to improve the quality and efficiency of care for Medicare-Medicaid, dually-eligible beneficiaries. See the Medicaid chapter for proposal descriptions. [$100 million in Medicare costs over 10 years]

Highlights of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)

On April 16, 2015, the President signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) into law. The law repealed the Sustainable Growth Rate Formula, established stable payments updates for physicians under Medicare, and promoted value-based payments and participation in alternative payment models. Furthermore, it includes a number of other provisions that affect Medicare, most notably requiring that Social Security numbers be removed from Medicare identification cards. Overall, the Congressional Budget Office estimated that the law will increase Medicare spending by a net $118 billion over 11 years (FY 2015-FY 2025).

Merit-Based Incentive Payment System and Alternative Payment Models

MACRA supports the Department’s goal to reward clinicians for value over volume by creating the new Merit-Based Incentive Payment System and providing bonus payments for participation in eligible alternative payment models. The Merit-Based Incentive Payment System combines several current quality programs for physicians and healthcare professionals into one comprehensive program starting in 2019. Under the Merit-Based Incentive Payment System, positive and negative payment adjustments will be made under the Medicare physician fee schedule based on quality performance, resource use, use of electronic health records, and participation in clinical practice improvement activities. These adjustments are capped at 4 percent in 2019; 5 percent in 2020; 7 percent in 2021; and 9 percent in 2022 and future years. Between 2019 and 2024, Medicare physicians and healthcare professionals can also receive an additional positive adjustment for exceptional performance. Physicians and healthcare professionals who are new to Medicare, have a low volume of Medicare patients, or receive the incentive payment for participating in an eligible alternative payment model described below, are exempt from the Merit-Based Incentive Payment System.

For physicians and healthcare professionals who qualify to receive a separate incentive payment for participating in an eligible alternative payment model, MACRA provides a five percent lump sum payment each year from FY 2019 to FY 2024. In order to be a “qualifying alternative payment model participant,” a physician or healthcare professional must receive a certain amount of their payments through an entity (such as an accountable care organization) that participates in an eligible alternative payment model. An alternative payment model is defined as a Center for Medicare and Medicaid Innovation model (but not a Health Care Innovation awardee), the Medicare Shared Savings Program, a Health Care Quality Demonstration, or any other demonstration authorized under federal law. In order to be deemed an eligible alternative payment model, the model must: 1) base payment off of performance on a set of quality measures, 2) require the use of certified electronic health record technology, and 3) include greater than nominal financial risk or be a medical home expanded under Innovation Center authority. The percentage thresholds for being a qualifying alternative payment model participant increase over time. Initially there is only a Medicare threshold, but starting in 2021, there is both a Medicare payment threshold option and a combined all-payer and Medicare threshold option. Including an all-payer threshold means that physicians and healthcare professionals have the potential to be rewarded with Medicare incentive payments for alternative payment model participation that includes payers outside the Medicare program. As a result, the Medicare incentive payments envisioned in MACRA have the potential to drive greater health system-wide alternative payment model participation.

Social Security Number Removal

MACRA also included the requirement that Social Security numbers be removed from all Medicare cards in order to protect beneficiaries against identity theft. The law provides $320 million for CMS, the Social Security Administration, and the Railroad Retirement Board to implement this change by April 2019. CMS is currently working towards updates to information technology systems to support seamless implementation of this change.

Highlights of the Bipartisan Budget Act of 2015

The Bipartisan Budget Act of 2015 was enacted on November 2, 2015. The Act included several significant Medicare program changes—generating $9.5 billion in program savings from FY 2016 to FY 2025, in addition to $11.2 billion in savings from extending the 2 percent Medicare sequester through FY 2025.

Part B Premium Fix

The Bipartisan Budget Act of 2015 included a provision that changed the calculation of the Medicare Part B premium for 2016. Due to the 0 percent cost-of-living adjustment in Social Security benefits, about 70 percent of Medicare beneficiaries are held harmless from increases in their Part B premiums for 2016 and continue to pay the same $104.90 monthly premium as in 2015. The remaining 30 percent of beneficiaries who are not held harmless would have faced a monthly premium this year of more than $150 (a nearly 50 percent increase from 2015). Under the Act, these beneficiaries will instead pay a standard monthly premium of $121.80, which represents the actuary’s premium estimate of the amount that would have applied to all beneficiaries without the hold harmless provision plus an add-on amount of $3. In order to make up the difference in lost revenue from the decrease in premiums, the Act requires a loan of general revenue from Treasury to the Part B Trust Fund. To repay this loan, the standard Part B monthly premium in a given year is increased by the $3 add-on amount until this loan is fully repaid, though the hold harmless provision still applies to this $3 premium increase. This provision will apply again in 2017 if there is a zero percent cost-of-living adjustment from Social Security.

Off-Campus Outpatient Provider Payment Policy

The Act codified the CMS definition of provider-based off‑campus hospital outpatient departments (i.e., outpatient providers) as those locations that are not on the main campus of a hospital and are located more than 250 yards from the main campus. Beginning on January 1, 2017, these off‑campus provider-based departments must bill under the applicable payment (likely the Physician Fee Schedule and Ambulatory Surgical Center Payment System) rather than the Outpatient Prospective Payment System, saving $9.3 billion over 10 years (FY 2016-2025). The section excludes any off-campus outpatient department provider that is already “billing” Medicare for covered outpatient provider department services under the Outpatient Prospective Payment System prior to November 2, 2015, and excludes services furnished by a dedicated emergency department. This provision is a modified version of a proposal included in the 2016 President’s Budget.

Medicare Quality Improvement Organizations

The mission of the Quality Improvement Organization Program is to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries. The Organizations are experts in the field working to drive local change, which can translate into national quality improvement. The current 5 year contract cycle, or 11th Statement of Work, began on August 1, 2014, and provides approximately $580 million in FY 2017 and $4.1 billion over 5 years.

In the 11th Statement of Work, there are 14 Quality Innovation Network contracts and 5 Beneficiary and Family Centered Care contracts. Quality Innovation Network contractors have been working to reduce patient harms such as central-line bloodstream infections, hospital readmissions, and adverse drug events. Beneficiary and Family Centered Care is the program’s statutory case review work, and includes beneficiary complaints, concerns related to early discharge from health care settings, and patient and family engagement. Since August 2014, nearly 200,000 case reviews have been conducted. Effective January 2016, Beneficiary and Family Centered Care Contract Quality Improvement Organizations assumed the initial reviews of short-stay hospital claims under a probe and educate process

Estimated Quality Improvement Organization Funding 11th Statement of Work (2014-2018)

FY 2017 Medicare Legislative Proposals

(Negative numbers reflect savings and positive numbers reflect costs)

Establish a Refundable Filing Fee

dollars in millions 2017 2017 -2021 2017 -2026
Support Delivery System Reform      
Payment Incentives      
Reform Medicare Advantage Payments to Improve the Efficiency and Sustainability of the Program -19,910 -77,240
Implement Bundled Payment for Post-Acute Care -470 -9,850
Expand Basis for Beneficiary Assignment for Accountable Care Organizations to include Nurse Practitioners, Physician Assistants, and Clinical Nurse Specialists -40 -150
Allow CMS to Assign Beneficiaries to Federally Qualified Health Centers and Rural Health Clinics Participating in the Medicare Shared Savings Program -20 -80
Allow Accountable Care Organizations to Pay Beneficiaries for Primary Care Visits up to the Applicable Medicare CostSharing Amount -40 -70
Establish a Bonus Payment for Hospitals Cooperating with Certain Alternative Payment Models
Establish a Hospital-Wide Readmissions Reduction Measure
Establish Quality Bonus Payments for High-Performing Part D Plans
Extend Accountability for Hospital-Acquired Conditions
Implement Value-Based Purchasing for Additional Providers
Care Delivery      
Expand the Ability of Medicare Advantage Organizations to Pay for Services Delivered via Telehealth -60 -160
Allow the Secretary to Introduce Primary Care Payments under the Physician Fee Schedule in a Budget Neutral Manner
Information      
Add Certain Behavioral Health Providers to the Electronic Health Record Incentive Programs (non-add) 4,450 5,200
Medicare Impact 650 760
Medicaid Impact (non-add) 3,800 4,440
Increase Value in Medicare Provider Payments      
Eliminate the 190-day Lifetime Limit on Inpatient Psychiatric Facility Services 160 1,020 2,370
Update Medicare Disproportionate Share Formula for Hospitals in Puerto Rico 20 70
Adjust Payment Updates for Certain Post-Acute Care Providers -1,600 -19,160 -86,580
Strengthen the Independent Payment Advisory Board to Reduce Long-Term Drivers of Medicare Cost Growth -1,067 -36,394
Reduce Medicare Coverage of Bad Debts -410 -11,320 -32,920
Encourage Workforce Development Through Targeted and More Accurate Indirect Medical Education Payments -1,170 -7,350 -17,800
Reform Medicare Hospice Payments -2,590 -9,250
Exclude Certain Services from the In-Office Ancillary Services Exception -1,750 -4,980
Provide Authority to Expand Competitive Bidding for Certain Durable Medical Equipment -1,070 -3,750
Encourage Appropriate Use of Inpatient Rehabilitation Facilities -160 -960 -2,150
Increase Value in Medicare Provider Payments (Continued)      
Reduce Critical Access Hospital Reimbursements from 101 Percent of Reasonable Costs to 100 Percent of Reasonable Costs -110 -690 -1,670
Prohibit Critical Access Hospital Designation for Facilities that are Less than 10 Miles from the Nearest Hospital -60 -360 -880
Allow the Secretary to Determine Hospital Acquired Condition Program Penalty Amounts and Distribution
Clarify the Medicare Fraction in the Medicare Disproportionate Share Hospital Statute
Modernize Funding for End Stage Renal Disease Networks
Recoup Initial Clinical Laboratory Fee Schedule Payments for Advanced Diagnostic Laboratory Tests in Excess of 100 Percent of the Final Payment Amount
Repeal the Rental Cap for Oxygen Equipment
Address the Rising Cost of Pharmaceuticals      
Align Medicare Drug Payment Policies with Medicaid Policies for Low-Income Beneficiaries -29,510 -121,250
Accelerate Manufacturer Discounts for Brand Drugs to Provide Relief to Medicare Beneficiaries in the Coverage Gap -3,260 -10,210
Modify Reimbursement of Part B Drugs -2,600 -7,750
Require Mandatory Reporting of Other Prescription Drug Coverage -10 -170 -480
Allow the Secretary to Negotiate Prices for Biologics and High Cost Prescription Drugs
Change the Part D Coverage Gap Discount Program Agreements from Annually to Quarterly
Establish Authority for a Program to Prevent Prescription Drug Abuse in Medicare Part D
Increase Part D Plan Sponsors’ Risk for Catastrophic Drugs
Require Evidence Development for Coverage of High Cost Drugs
Increase the Availability of Generic Drugs and Biologics      
Prohibit Brand and Generic Drug Manufacturers from Delaying the Availability of New Generic Drugs and Biologics (Medicare impact) -800 -4,910 -12,250
Modify Length of Exclusivity to Facilitate Faster Development of Generic Biologics (Medicare impact) -1,580 -6,890
Establish Transparency and Reporting Requirements in Pharmaceutical Drug Pricing
Medicare Structural Reforms      
Eliminate Beneficiary Coinsurance for Screening Colonoscopies with Polyp Removal 160 950 2,430
Increase Income Related Premiums under Medicare Parts B and D -5,260 -41,230
Encourage the Use of Generic Drugs by Low-Income Beneficiaries -3,330 -9,630
Modify the Part B Deductible for New Beneficiaries -140 -4,230
Introduce Home Health Copayments for New Beneficiaries -100 -1,300
Reforming the Medicare Appeals Process      
Provide Office of Medicare Hearings and Appeals and Department Appeals Board Authority to Use Recovery Audit Contractor Collections 127 635 1,270
Establish a Refundable Filing Fee
Establish Magistrate Adjudication for Claims with Amount in Controversy Below New Administrative Law Judge Amount in Controversy Threshold
Expedite Procedures for Claims with No Material Fact in Dispute
Increase Minimum Amount in Controversy for Administrative Law Judge Adjudication of Claims to Equal Amount Required for Judicial Review
Remand Appeals to the Redetermination Level with the Introduction of New Evidence
Sample and Consolidate Similar Claims for Administrative Efficiency
Other Proposals      
Allow Beneficiaries to Pay a Sum Certain to Medicare for Future Medical Items and Services -65 -65
Clarify Calculation of the Late Enrollment Penalty for Medicare Part B Premiums
Reduce Fraud, Waste, and Abuse in Medicare /1 111 612 1,443
Medicare-Medicaid Enrollee Proposals (Medicare Impact) /2 20 100
Interactions /3 33 15,660 71,328
Total /4 -3,729 -98,215 -419,438
       
1/ These proposals are described in the Program Integrity chapter, which reports the total cost of the proposal to both Medicare and Medicaid.
2/ These proposals are described in the Medicaid chapter, which reports the total cost of the proposal to both Medicare and Medicaid.
3/ Adjusts for reductions in baseline IPAB savings as a result of budget proposals and other Medicare interactions.
4/ This total does not include non-PAYGO savings.

 

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Content created by Office of Budget (OB)
Content last reviewed on January 26, 2017